Towards a Reformulation of Monetary Theory: Competitive Banking / Joseph E. Stiglitz, Bruce Greenwald.

By:

Stiglitz, Joseph E

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4117.Publication details: Cambridge, Mass. National Bureau of Economic Research 1992.Description: 1 online resource: illustrations (black and white)Subject(s):

E40 - General

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Abstract: This paper, after providing a critique of standard monetary theory based on the transactions demand for money, examines the effect of monetary policy (changes in reserve requires and open market operations) in a model with competitive, risk averse banks. The effects of changes in bank net worth and bank's risk perceptions are also analyzed. In deep recessions, monetary policy may be ineffective because banks are unwilling to lend. The effects of monetary policy are, at most, only partially mediated through changes in the interest rate. The implications for traditional IS-LM analysis are briefly noted.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w4117 (Browse shelf(Opens below))	Not For Loan

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July 1992.

This paper, after providing a critique of standard monetary theory based on the transactions demand for money, examines the effect of monetary policy (changes in reserve requires and open market operations) in a model with competitive, risk averse banks. The effects of changes in bank net worth and bank's risk perceptions are also analyzed. In deep recessions, monetary policy may be ineffective because banks are unwilling to lend. The effects of monetary policy are, at most, only partially mediated through changes in the interest rate. The implications for traditional IS-LM analysis are briefly noted.